MacroEconomics – Flashcards

Economics is the study? of:

A simplified representation of a complex system dealing with economics is known? as:

Economic? decision-making often focuses on how a one unit change will impact the system. This type of analysis is known? as:

Ph.D. economists have traditionally been hired? by:

According to the? article, ___________ is hiring an economist to help its team of economists use existing data to? "reveal ways to improve the? company's service for buyers and? sellers."

The behaviors that these firms are attempting to model are the subject? of:

The economic way of thinking is best described as

Suppose a government official is trying to decide whether or not to allow more immigration. Which of the following is not an aspect of the economic way of thinking that would apply in this? decision-making process?

To which of the following? household-type(s) does the phrase? "unlimited wants and limited resources"

One reason that economists use microeconomics as the basis of macroeconomic analysis is

The three fundamental economic questions that a nation addresses in order to allocate? society's scarce resources include all of the following ?except:

Which of the following is a true statement about? self-interest as used in the study of? economics?

People may appear to use rules of? thumb, as suggested by the assumption of bounded? rationality, even though they may really be behaving in a manner suggested by the rationality assumption if

The ceteris paribus assumption means

An economic model is developed from a set of assumptions about consumer behavior and predicts that people will buy less of a good the higher the price of the good. Empirical testing of this model would involve

Consider the following statement based on a positive economic analysis that assumes that all other things remain? constant. Falling gasoline prices will result in additional vacation travel. Which of the following? (initially assumed? constant) could occur and thus offset the stated outcome?

Economic goods are

Farmer McDonald has 100 acres of land on which he can grow soybeans or corn. An acre of land yields 200 bushels of soybeans or 100 bushels of corn or some combination of both. The accompanying figure refers to farmer McDonald's

Steve can? wash, fold, and iron a basket of laundry in two hours and prepare a meal in one hour. His roommate Mike can? wash, fold, and iron a basket of laundry in three hours and prepare a meal in one hour. The absolute advantage in laundry is held by

The comparative advantage in meal preparation is held by

The division of productive activities among persons and regions so that no one individual or region is totally? self-sufficient is known as

Which of the following statements is? true?

Specialization and comparative advantage

The inverse relationship between price and quantity demanded is often referred to? as:

If prices fall for a particular good then consumers? will:

Other things remaining? equal, the law of demand says that higher prices will lead to a

All of the following pairs of goods are substitutes except

All of the following pairs of goods are complements except

Assume the cost of aluminum used by? soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft? drinks?

Which of the following will cause an outward? (rightward) shift in? supply?

What is the economic effect of price? ceilings?

According to the? text, firms encounter rising costs when they attempt to produce more in the same time period. As a? consequence, they must be offered a higher price to be willing to incur these higher costs. The resulting relationship between price and quantity supplied is

Inflation is more harmful to? people:

Inflation that is higher than? 50% per month is known? as:

High levels of inflation can lead? to:

India will sell? ___________ of rice from the government stockpiles.

Which of the following measures will lower the natural rate of? unemployment?

Full employment means

According to the circular flow of income and? output, which of the following is not? true?

The expenditure approach to tabulating GDP

Using the expenditures approach to national income? accounting, which of the following would be counted as investment spending?

Which of the following is a true statement about comparing world? incomes?

Using the expenditures approach to national income? accounting, which of the following would be counted as consumption?

Which of the following statements is ?false?

Brazil has a population of about 200? million, with about 145 million over the age of 15. Of? these, an estimated 25? percent, or 35 million? people, are functionally illiterate. The typical literate individual reads only about two nonacademic books per? year, which is less than half the number read by the typical literate U.S. or European resident. Answer the following questions solely from the perspective of new growth? theory: a. Which of the following best explains the implications of? Brazil's literacy and reading rates for its growth prospects in light of the key tenets of new growth theory.

b. What types of policies might Brazil implement to improve its growth? prospects?

Mexico has a more open economy? (lower tariff? barriers) than Nigeria Thus it would be expected that the average annual per capita growth rate of real GDP would be higher in Mexico. Free trade encourages economic growth by

In the absence of? well-defined property? rights, we would likely find

Which of the following is not a true statement about the impact of immigration on economic? growth?

To encourage economic development a country should do all of the following except

Typically, modern developed countries have gone through three stages Initially countries have most of the population involved in Secondly, much of the population moves to Finally, there is a shift toward

Which of the following factors could cause the economy to experience? supply-side inflation?

In the long? run, persistent deflation in a growing economy can occur if

An increase in the LRAS curve that is larger proportionately than an increase in the AD curve will lead to

Which of the following will generate an increase in aggregate? demand?

According to the? real-balance effect, an increase in the price level

Which of the following will generate an increase in aggregate? demand?

An? economy's rate of economic growth equals

Which of the following will increase labor? productivity?

The rate of growth in the productivity of capital is 1? percent, the rate of growth of capital is 2? percent, the rate of growth of labor is 1? percent, and the rate of growth in the productivity of labor is 3 percent. From this we know that

Labor productivity is normally measured by

A country that saves a larger percentage of GDP than another country? will, ceteris paribus

For economic growth to take? place, a country must save.? But, for saving to actually generate economic? growth,

One of the most important factors for economic growth to take place is that a society must

Which of the following statements is ?false?

Total capital is the sum of

On a national? basis, higher saving rates eventually mean higher living standards in the long? run, all other things held constant.

Improvements in ______ productivity, all other things being? equal, lead to _________ economic growth and higher living standards. One fundamental determinant of the rate of growth is the rate of _________ . To have more consumption in the? future, we have to __________ rather than consume. In? general, countries that have had higher rates of _______ have had higher rates of growth in per capita real GDP.

What is economic? growth?

Why are politicians and economists concerned about the economic growth rate in the? U.S.?

Economic growth as it is currently measured

Real standards of living can only go up with positive economic growth.

All of the following are benefits of economic growth except

If the average annual rate of economic growth is 4? percent, approximately how long will it take for the? nation's per capita real GDP to? double?

Economic growth can be defined as the increase in _____ real? GDP, measured by its rate of change per year. The _____ of economic growth are reductions in? illiteracy, poverty, and illness and increases in life spans and political stability. The costs of economic growth may include environmental? pollution, alienation, and urban congestion. Small? percentage-point differences in growth rates lead to ______ differences in per capita real GDP over time.

According to the new growth theory

New growth theory differs from traditional growth theory in that

The new growth theory argues that

Economic growth is positively related to all of the following except

There are predictions that computers may become as powerful as the human brain by 2030.

According to new growth? theory, more technological advances will occur when the rewards are greater.

In the United? States, a patent gives the inventor of a product the exclusive right to? make, use, or sell the product for 50 years.

For every 1 percent increase in the stock of research and development in the United? States, productivity in the rest of the world

Nations with high tariff barriers have tended to have higher average annual rates of real GDP per capita growth since 1965.

An innovation is the same thing as an invention.

According to economist Paul? Romer, ideas are what drive economic growth.

The knowledge and skills that people in the workforce acquire through? education, on-the-job? training, and? self-teaching is referred to as

Population growth generally

Limiting the immigration of highly educated professionals hurts U.S. economic growth because

According to new growth? theorists, increased population growth rates can lead to faster economic growth because

According to Julian? Simon,

Government enforced property rights are crucial to economic growth because they

Which of the following statements is not? true?

Entrepreneurship functions better when

In the absence of? well-defined property? rights, we would likely find

Population growth can have both a positive and a negative impact on economic growth.

In? general, the more securely private property rights are? assigned, the more capital accumulation there will be.

The economic development of a country is dependent on all of the following except

The development of modern rich nations can be characterized by three? stages:

To encourage economic development a country should do all of the following except

Developing countries should

For? modern, rich? nations, the three stages of development? (in order of? occurrence) are

Which of the following factors are highly related to the pace of economic? development?

Total expenditures for domestically produced goods and services consist of

Which one of the following is not a component of total? expenditures?

What determines the total value of annual U.S.? GDP?

The total of all planned real expenditures in the economy is

The aggregate demand curve

The aggregate demand curve slopes downward because of the

According to the? real-balance effect, an increase in the price level

According to the interest rate? effect, an increase in the price level

Which of the following will generate an increase in aggregate? demand?

The U.S. aggregate demand curve would shift to the left if

The aggregate demand curve would shift to the right as a result of

All of the following would cause the aggregate demand curve to shift except

In an open? economy, the total value of GDP is based on the spending decisions of? individuals, firms,? governments, and foreign residents.

As more economic development? occurs,

The model of? long-run equilibrium

One of the main conclusions of? Say's Law was that

Which of the following best exemplifies? Say's Law?

Say's Law fits best in the ______since this philosophy placed great importance on _______to determine the _________.

Suppose that aggregate demand were to increase due to a weaker dollar. Which of the following would be the? result?

?Say's law asserts that

Which of the following is not one of the four major assumptions of the classical? model?

The classical economists believed that the leakage of saving would be matched by the injection of business investment.

The lower the rate of? interest, the? ________ profitable it is to invest and the? ______ the level of desired investment.

The level of employment in an economy determines its real GDP.

If an excess quantity of labor is supplied at a particular wage? level, the wage level

According to the classical? model, if the economy starts at full employment an increase in aggregate demand will cause all of the following to occur except

The extent to which real GDP responds to changes in the price level along the? short-run aggregate supply curve is largely determined by

Which of the following might also yield the outcome shown by your? diagram?

In considering the forces which may increase an? economy's real GDP in the long? run, which of the following will NOT play a? role?

The Modern Keynesian? short-run aggregate supply curve is best described by which of the following? statements?

The modern Keynesian Model assumes that

Since the modern Keynesian Model allows for some price? response, the aggregate supply curve

Suppose that the wage rate of labor increased temporarily. The result of this would be best described by

Suppose that there is a? temporary, but significant increase in oil prices in an economy with an? upward-sloping SRAS curve. As a policy response to this? short-lived but sudden increase in oil? prices, a central bank

Suppose that an economy is currently in a long run equilibrium where SRAS? = LRAS? = AD. If there is a decrease in the money supply?, which of the following is the best description of the outcome in the? economy?

Suppose that an economy is currently in a long run equilibrium where SRAS? = LRAS? = AD. Given that there is a decrease in the money supply?, the new short run position of the economy finds itself in is termed

Suppose that the value of the US dollar? ($) yesterday was? $1 = 4 yen. Today the exchange rate changed such that? $1 = 5 yen. Given that the US? $ has? appreciated, the aggregate demand in the United States should

Given that the US? $ has? appreciated, the? short-run aggregate supply in the United States should

Suppose that the value of the US? $ yesterday was? $1 = 4 pesos. Today the exchange rate changed such that? $1 = 8 pesos. One can say the

An appreciation of the US? $ should result in

In the Keynesian? model, if disposable income were to increase households would

The relationship between the MPC and the MPS indicates that the entire increase in household disposable income

In the Keynesian model equilibrium national income

If real GDP falls below total planned expenditures the economy will see

Which of the following statements is true when considering an economy with an? upward-sloping short-run aggregate supply? curve?

The multiplier is weakened in inflationary gaps because of

Suppose that aggregate demand were to decrease due to a stronger dollar. Which of the following would be the? result?

Suppose that Congress enacts a significant tax cut with the expectation that this action will stimulate aggregate demand and push up real GDP in the short run. In? fact, however, neither real GDP nor the price level changes significantly as a result of the tax cut. This outcome can be explained by all of the? following, except one. Which one of the following is the? exception?

The Congressional? meetings, discussions,? arguments, debates over fiscal policy and the subsequent signing or vetoing by the President of a bill are part of the

Which of the following statements is true when considering time? lags?

During normal? times, fiscal policy probably achieves most of its impact through

In early? 2008, it appeared that the U.S. economy was either in a recession or growing very slowly. President Bush announced a program of tax rebates. This program can be described as? ___________ and was intended to? ______________.

Which of the following is not a source of funding available to? governments?

The federal government has its best opportunity to lower its national debt when it has

a. ?Previously, the government operated with a balanced? budget, but recently there has been a sudden increase in federal tax collections. The net public debt

The federal government had been operating with a very small annual budget deficit until three successive hurricanes hit the Atlantic? Coast, and now government spending has risen substantially. The net public debt

c. The General National Mortgage? Association, a federal government agency that purchases certain types of home? mortgages, buys U.S. Treasury bonds from another government agency. The net public debt

What is the relationship between the gross public debt and the net public? debt?

If federal budget deficits ?increase, then a part of that deficit

During the late? 1970s, prices quoted in terms of the Israeli? currency, the? shekel, rose so fast that grocery stores listed their prices in terms of the U.S. dollar and provided customers with? dollar-shekel conversion tables that they updated daily. Although people continued to buy goods and services and make loans using? shekels, many Israeli citizens converted shekels to dollars to avoid a reduction in their wealth due to inflation.? Thus, the U.S. dollar functioned as money in Israel during this period

During the? 1945-1946 Hungarian? hyperinflation, when the rate of inflation reached 41.9 quadrillion percent per? month, the Hungarian government discovered that the real value of its tax receipts was falling dramatically. To keep real tax revenues more? stable, it created a good called a? "tax pengö", in which all bank deposits were denominated for purposes of taxation. ?Nevertheless, payments for goods and services were made only in terms of the regular Hungarian? currency, whose value tended to fall rapidly even though the value of a tax? pengö remained stable. Prices were also quoted only in terms of the regular currency.? Lenders, however, began denominating loan payments in terms of tax? pengös. The tax? pengö functioned as money in Hungary in 1945 and 1946

A? $1,000 balance in a transactions deposit at a mutual savings bank. This item is counted in

A? $100,000 certificate of deposit issued by a New York bank. This item is counted in

A? $10,000 time deposit an elderly widow holds at her credit union. This item is counted in

A? $50 traveler's check. This item is counted in

A? $50,000 money market deposit account balance. This item is counted in

Jennifer has $1,000 in her checking account. Is this counted in M1? only, M2? only, M1 and? M2, or? neither?

A manager of a savings and loan association responds to reports of a likely increase in federal deposit insurance coverage. She directs loan officers to extend mortgage loans to less creditworthy borrowers. This situation poses

A loan applicant does not mention that a legal judgment in his divorce case will require him to make alimony payments to his? ex-wife. This situation poses

An individual who was recently approved for a loan to start a new business decides to use some of the funds to take a Hawaiian vacation. This situation poses

Which of the following statements is true when considering central? banks?

Which of the following is a function of the Federal Reserve? System?

The Federal Reserve purchases ?$12 million in U.S. Treasury bonds from a bond? dealer, and the? dealer's bank credits the? dealer's account. The required reserve ratio is 11 ?percent, and the bank typically lends any excess reserves immediately. Assuming that no currency leakage? occurs, calculate how much will the bank be able to lend to its customers following the? Fed's purchase. ?$

Calculate the sum of this? bank's total amount of liabilities and net worth

Calculate the additional amount of loans this bank can make to households and firms.

Calculate the current quantity of transactions deposits at this bank.

Stockbrokers monitor the companies after investing funds in? them, in order to

Commercial banks screen their borrowers before a loan can be? approved, in order to

Money market mutual funds combine the savings of many? individuals, in order to

Using the line drawing tool?, draw a money demand curve on the graph indicating the relationship between the interest rate and the opportunity cost of holding money. Label the curve Md.

If the Fed increases the discount? rate, relative to the federal funds? rate, then this

a. As a result of the dollar? appreciation, U.S. net export expenditures will

b. The aggregate demand curve that could represent the aggregate demand effect of the U.S.? dollar's appreciation is

The real GDP _________ and the price level will ________ as a result of the dollar appreciation.

c. Federal Reserve may take a certain policy action to prevent the? dollar's appreciation from affecting equilibrium real GDP in the short run. Which one of the following is not a likely policy action that the Fed will? take?

Which of the following is a true? statement?

The indirect effect of an increase in the money supply works through

The graph to the right shows the supply and demand for bonds. Suppose that the Fed conducts an open market operation to increase the money supply. ?1.) Using the line drawing tool?, show the effect on the bond market. Properly label your line. ?2.) Using the point drawing tool?, indicate the new equilibrium? point, and label it . As a result of this open market? operation, the interest rate will

Suppose that initially the money supply is ?$2 ?trillion, the price level equals 44?, the real GDP is ?$6 trillion in? base-year dollars, and income velocity of money is 12. Then the money supply increases by ?$200 ?billion, while real GDP and income velocity of money remain unchanged. a. According to the quantity theory of money and prices, calculate the new price level after the increase in money? supply:

b. Calculate the percentage increase in money? supply:

Calculate the percentage change in the price? level:

d. The percentage changes in the money supply is ________ percentage changes in the price level.

To implement a credit policy intended to expand liquidity of the banking? system, the Fed desires to increase its assets by lending to a substantial number of banks. How might the Fed adjust the interest rate that it pays banks on reserves in order to induce them to hold the reserves required for funding this credit policy? action? The Fed should _______ the interest rate.

What will happen to the? Fed's liabilities if it implements the policy action to induce banks to hold the reserves required for funding its credit? policy? The? Fed's liabilities will

Suppose that the Fed pursues an expansionary monetary policy. Which of the following statements best explains the transmission mechanism in an open? economy?

In an open? economy, the net export effect

The Fed acts like a private banking institution when it

The Fed acts like a government agency when it

Which of the following is not a duty of the a central? bank?

Due to the? Gramm-Leach-Bliley Act of 1999

Which of the following statements is true when considering national banking structures around the? world?

Which of the following statements is true when considering central? banks?

What is the basic structure of the Federal Reserve? Bank?

Which of the following events caused Congress to begin seriously looking at setting up the Federal Reserve? system?

Which of the functions of the Federal Reserve is appropriately matched with its correct? institution?

If you live in? Atlanta, Georgia, and you purchase a computer in Los? Angeles, California, while there on? vacation, which of the following paths would your check take before it finally? clears?

Which of the following does not describe some of the functions of the Federal Reserve? Bank?

When the Fed acts as the lender of the? "last resort" it means that

Which of the following statements is ?incorrect?

When a temporarily illiquid bank which is otherwise in good financial condition borrows money from the Fed in an attempt to prevent a loss of confidence in the bank or in other? banks, this is an example of the Fed

What are the features of federal deposit? insurance?

The type of policy making that is not in response to actual or potential changes in overall economic activity is called

The natural rate of unemployment depends on factors that affect the behavior of both workers and firms. All the following are likely to influence the natural rate of? unemployment, except

The natural rate of unemployment in the U.S.

The actual rate of unemployment is

Suppose that economists were able to use U.S. economic data to demonstrate that the rational expectations hypothesis is true. In light of? that, the policy irrelevance proposition will

The? real-business-cycle approach attributes even? short-run increases in real GDP largely to aggregate supply shocks. Rightward shifts in aggregate supply tend to push down the equilibrium price level. The United States has experienced low but persistent inflation in recent years. This happened because

The policy irrelevance proposition states that

If prices are sticky in the short? run, a decrease in aggregate demand will lead to

Because of the effect of sticky prices on real GDP in the short? run, new Keynesian economists advocate _______ policymaking

Which of the following is an argument in favor of passive ?policymaking?

Monetary policy undertaken by the Fed

Suppose that people who previously had held jobs become structurally unemployed due to establishment of new government regulations during a period in which the inflation rate remains unchanged. Would the result be a movement along or a shift of the? short-run Phillips? curve?

Consider a situation in which a future president has appointed Federal Reserve leaders who conduct monetary policy much more erratically than in past years. The consequence is that the quantity of money in circulation varies in a much more unsystematic? and, hence,? hard-to-predict manner. According to the policy irrelevance? proposition, is it more or less likely that the? Fed's policy actions will cause real GDP to change in the short? run?

People called? "Fed watchers" earn their living by trying to forecast what policies the Federal Reserve will implement within the next few weeks and months. Suppose that Fed watchers discover that the current group of Fed officials is following very systematic and predictable policies intended to reduce the unemployment rate. The Fed watchers then sell this information to? firms, unions, and others in the private sector. If pure competition? prevails, prices and wages are? flexible, and people form rational? expectations, then the? Fed's policies

What is the rational expectations? hypothesis?

The combination of rational expectations and perfectly competitive markets is best reflected in which of the following? models?

Which of the following statements about the policy irrelevance proposition is not? true?

According to the rational expectations? hypothesis, a policy cannot have a? long-run effect on real GDP or the unemployment rate because

Suppose that more unemployed people who are classified as part of frictional unemployment decide to stop looking for work and start their own businesses instead. What is likely to happen to each of the? following, other things being? equal?

In new Keynesian models of aggregate economic? activity, "sticky" prices and wages are explained by

According to the rational expectations? hypothesis, an? individual's assessment of future economic performance